diff --git a/doc/release-notes-18982.md b/doc/release-notes-18982.md
new file mode 100644
index 00000000000..d1b8528d137
--- /dev/null
+++ b/doc/release-notes-18982.md
@@ -0,0 +1,8 @@
+Notification changes
+--------------------
+
+`-walletnotify` notifications are now sent for wallet transactions that are
+removed from the mempool because they conflict with a new block. These
+notifications were sent previously before the v0.19 release, but had been
+broken since that release (bug
+[#18325](https://github.com/bitcoin/bitcoin/issues/18325)).
diff --git a/src/interfaces/chain.cpp b/src/interfaces/chain.cpp
index d8e459a8e8d..d1e04b114d4 100644
--- a/src/interfaces/chain.cpp
+++ b/src/interfaces/chain.cpp
@@ -63,9 +63,9 @@ public:
     {
         m_notifications->transactionAddedToMempool(tx);
     }
-    void TransactionRemovedFromMempool(const CTransactionRef& tx) override
+    void TransactionRemovedFromMempool(const CTransactionRef& tx, MemPoolRemovalReason reason) override
     {
-        m_notifications->transactionRemovedFromMempool(tx);
+        m_notifications->transactionRemovedFromMempool(tx, reason);
     }
     void BlockConnected(const std::shared_ptr<const CBlock>& block, const CBlockIndex* index) override
     {
diff --git a/src/interfaces/chain.h b/src/interfaces/chain.h
index 7dfc77db7b8..61d7ddb9340 100644
--- a/src/interfaces/chain.h
+++ b/src/interfaces/chain.h
@@ -20,6 +20,7 @@ class CRPCCommand;
 class CScheduler;
 class Coin;
 class uint256;
+enum class MemPoolRemovalReason;
 enum class RBFTransactionState;
 struct bilingual_str;
 struct CBlockLocator;
@@ -239,7 +240,7 @@ public:
     public:
         virtual ~Notifications() {}
         virtual void transactionAddedToMempool(const CTransactionRef& tx) {}
-        virtual void transactionRemovedFromMempool(const CTransactionRef& ptx) {}
+        virtual void transactionRemovedFromMempool(const CTransactionRef& tx, MemPoolRemovalReason reason) {}
         virtual void blockConnected(const CBlock& block, int height) {}
         virtual void blockDisconnected(const CBlock& block, int height) {}
         virtual void updatedBlockTip() {}
diff --git a/src/txmempool.cpp b/src/txmempool.cpp
index c5c0208d8f5..7d8eb8a3235 100644
--- a/src/txmempool.cpp
+++ b/src/txmempool.cpp
@@ -410,7 +410,7 @@ void CTxMemPool::removeUnchecked(txiter it, MemPoolRemovalReason reason)
         // for any reason except being included in a block. Clients interested
         // in transactions included in blocks can subscribe to the BlockConnected
         // notification.
-        GetMainSignals().TransactionRemovedFromMempool(it->GetSharedTx());
+        GetMainSignals().TransactionRemovedFromMempool(it->GetSharedTx(), reason);
     }
 
     const uint256 hash = it->GetTx().GetHash();
diff --git a/src/validationinterface.cpp b/src/validationinterface.cpp
index 9437f9c817c..3dfbcc581cd 100644
--- a/src/validationinterface.cpp
+++ b/src/validationinterface.cpp
@@ -199,22 +199,22 @@ void CMainSignals::UpdatedBlockTip(const CBlockIndex *pindexNew, const CBlockInd
                           fInitialDownload);
 }
 
-void CMainSignals::TransactionAddedToMempool(const CTransactionRef &ptx) {
-    auto event = [ptx, this] {
-        m_internals->Iterate([&](CValidationInterface& callbacks) { callbacks.TransactionAddedToMempool(ptx); });
+void CMainSignals::TransactionAddedToMempool(const CTransactionRef& tx) {
+    auto event = [tx, this] {
+        m_internals->Iterate([&](CValidationInterface& callbacks) { callbacks.TransactionAddedToMempool(tx); });
     };
     ENQUEUE_AND_LOG_EVENT(event, "%s: txid=%s wtxid=%s", __func__,
-                          ptx->GetHash().ToString(),
-                          ptx->GetWitnessHash().ToString());
+                          tx->GetHash().ToString(),
+                          tx->GetWitnessHash().ToString());
 }
 
-void CMainSignals::TransactionRemovedFromMempool(const CTransactionRef &ptx) {
-    auto event = [ptx, this] {
-        m_internals->Iterate([&](CValidationInterface& callbacks) { callbacks.TransactionRemovedFromMempool(ptx); });
+void CMainSignals::TransactionRemovedFromMempool(const CTransactionRef& tx, MemPoolRemovalReason reason) {
+    auto event = [tx, reason, this] {
+        m_internals->Iterate([&](CValidationInterface& callbacks) { callbacks.TransactionRemovedFromMempool(tx, reason); });
     };
     ENQUEUE_AND_LOG_EVENT(event, "%s: txid=%s wtxid=%s", __func__,
-                          ptx->GetHash().ToString(),
-                          ptx->GetWitnessHash().ToString());
+                          tx->GetHash().ToString(),
+                          tx->GetWitnessHash().ToString());
 }
 
 void CMainSignals::BlockConnected(const std::shared_ptr<const CBlock> &pblock, const CBlockIndex *pindex) {
diff --git a/src/validationinterface.h b/src/validationinterface.h
index 9c23965bc16..e96f2883fc5 100644
--- a/src/validationinterface.h
+++ b/src/validationinterface.h
@@ -21,6 +21,7 @@ class CConnman;
 class CValidationInterface;
 class uint256;
 class CScheduler;
+enum class MemPoolRemovalReason;
 
 /** Register subscriber */
 void RegisterValidationInterface(CValidationInterface* callbacks);
@@ -96,7 +97,7 @@ protected:
      *
      * Called on a background thread.
      */
-    virtual void TransactionAddedToMempool(const CTransactionRef &ptxn) {}
+    virtual void TransactionAddedToMempool(const CTransactionRef& tx) {}
     /**
      * Notifies listeners of a transaction leaving mempool.
      *
@@ -129,7 +130,7 @@ protected:
      *
      * Called on a background thread.
      */
-    virtual void TransactionRemovedFromMempool(const CTransactionRef &ptx) {}
+    virtual void TransactionRemovedFromMempool(const CTransactionRef& tx, MemPoolRemovalReason reason) {}
     /**
      * Notifies listeners of a block being connected.
      * Provides a vector of transactions evicted from the mempool as a result.
@@ -196,8 +197,8 @@ public:
 
 
     void UpdatedBlockTip(const CBlockIndex *, const CBlockIndex *, bool fInitialDownload);
-    void TransactionAddedToMempool(const CTransactionRef &);
-    void TransactionRemovedFromMempool(const CTransactionRef &);
+    void TransactionAddedToMempool(const CTransactionRef&);
+    void TransactionRemovedFromMempool(const CTransactionRef&, MemPoolRemovalReason);
     void BlockConnected(const std::shared_ptr<const CBlock> &, const CBlockIndex *pindex);
     void BlockDisconnected(const std::shared_ptr<const CBlock> &, const CBlockIndex* pindex);
     void ChainStateFlushed(const CBlockLocator &);
diff --git a/src/wallet/wallet.cpp b/src/wallet/wallet.cpp
index 78245632540..89737ca7b53 100644
--- a/src/wallet/wallet.cpp
+++ b/src/wallet/wallet.cpp
@@ -21,6 +21,7 @@
 #include <script/descriptor.h>
 #include <script/script.h>
 #include <script/signingprovider.h>
+#include <txmempool.h>
 #include <util/bip32.h>
 #include <util/check.h>
 #include <util/error.h>
@@ -1100,23 +1101,52 @@ void CWallet::SyncTransaction(const CTransactionRef& ptx, CWalletTx::Confirmatio
     MarkInputsDirty(ptx);
 }
 
-void CWallet::transactionAddedToMempool(const CTransactionRef& ptx) {
+void CWallet::transactionAddedToMempool(const CTransactionRef& tx) {
     LOCK(cs_wallet);
-    CWalletTx::Confirmation confirm(CWalletTx::Status::UNCONFIRMED, /* block_height */ 0, {}, /* nIndex */ 0);
-    SyncTransaction(ptx, confirm);
+    SyncTransaction(tx, {CWalletTx::Status::UNCONFIRMED, /* block height */ 0, /* block hash */ {}, /* index */ 0});
 
-    auto it = mapWallet.find(ptx->GetHash());
+    auto it = mapWallet.find(tx->GetHash());
     if (it != mapWallet.end()) {
         it->second.fInMempool = true;
     }
 }
 
-void CWallet::transactionRemovedFromMempool(const CTransactionRef &ptx) {
+void CWallet::transactionRemovedFromMempool(const CTransactionRef& tx, MemPoolRemovalReason reason) {
     LOCK(cs_wallet);
-    auto it = mapWallet.find(ptx->GetHash());
+    auto it = mapWallet.find(tx->GetHash());
     if (it != mapWallet.end()) {
         it->second.fInMempool = false;
     }
+    // Handle transactions that were removed from the mempool because they
+    // conflict with transactions in a newly connected block.
+    if (reason == MemPoolRemovalReason::CONFLICT) {
+        // Call SyncNotifications, so external -walletnotify notifications will
+        // be triggered for these transactions. Set Status::UNCONFIRMED instead
+        // of Status::CONFLICTED for a few reasons:
+        //
+        // 1. The transactionRemovedFromMempool callback does not currently
+        //    provide the conflicting block's hash and height, and for backwards
+        //    compatibility reasons it may not be not safe to store conflicted
+        //    wallet transactions with a null block hash. See
+        //    https://github.com/bitcoin/bitcoin/pull/18600#discussion_r420195993.
+        // 2. For most of these transactions, the wallet's internal conflict
+        //    detection in the blockConnected handler will subsequently call
+        //    MarkConflicted and update them with CONFLICTED status anyway. This
+        //    applies to any wallet transaction that has inputs spent in the
+        //    block, or that has ancestors in the wallet with inputs spent by
+        //    the block.
+        // 3. Longstanding behavior since the sync implementation in
+        //    https://github.com/bitcoin/bitcoin/pull/9371 and the prior sync
+        //    implementation before that was to mark these transactions
+        //    unconfirmed rather than conflicted.
+        //
+        // Nothing described above should be seen as an unchangeable requirement
+        // when improving this code in the future. The wallet's heuristics for
+        // distinguishing between conflicted and unconfirmed transactions are
+        // imperfect, and could be improved in general, see
+        // https://github.com/bitcoin-core/bitcoin-devwiki/wiki/Wallet-Transaction-Conflict-Tracking
+        SyncTransaction(tx, {CWalletTx::Status::UNCONFIRMED, /* block height */ 0, /* block hash */ {}, /* index */ 0});
+    }
 }
 
 void CWallet::blockConnected(const CBlock& block, int height)
@@ -1127,9 +1157,8 @@ void CWallet::blockConnected(const CBlock& block, int height)
     m_last_block_processed_height = height;
     m_last_block_processed = block_hash;
     for (size_t index = 0; index < block.vtx.size(); index++) {
-        CWalletTx::Confirmation confirm(CWalletTx::Status::CONFIRMED, height, block_hash, index);
-        SyncTransaction(block.vtx[index], confirm);
-        transactionRemovedFromMempool(block.vtx[index]);
+        SyncTransaction(block.vtx[index], {CWalletTx::Status::CONFIRMED, height, block_hash, (int)index});
+        transactionRemovedFromMempool(block.vtx[index], MemPoolRemovalReason::BLOCK);
     }
 }
 
@@ -1144,8 +1173,7 @@ void CWallet::blockDisconnected(const CBlock& block, int height)
     m_last_block_processed_height = height - 1;
     m_last_block_processed = block.hashPrevBlock;
     for (const CTransactionRef& ptx : block.vtx) {
-        CWalletTx::Confirmation confirm(CWalletTx::Status::UNCONFIRMED, /* block_height */ 0, {}, /* nIndex */ 0);
-        SyncTransaction(ptx, confirm);
+        SyncTransaction(ptx, {CWalletTx::Status::UNCONFIRMED, /* block height */ 0, /* block hash */ {}, /* index */ 0});
     }
 }
 
@@ -1685,8 +1713,7 @@ CWallet::ScanResult CWallet::ScanForWalletTransactions(const uint256& start_bloc
                 break;
             }
             for (size_t posInBlock = 0; posInBlock < block.vtx.size(); ++posInBlock) {
-                CWalletTx::Confirmation confirm(CWalletTx::Status::CONFIRMED, block_height, block_hash, posInBlock);
-                SyncTransaction(block.vtx[posInBlock], confirm, fUpdate);
+                SyncTransaction(block.vtx[posInBlock], {CWalletTx::Status::CONFIRMED, block_height, block_hash, (int)posInBlock}, fUpdate);
             }
             // scan succeeded, record block as most recent successfully scanned
             result.last_scanned_block = block_hash;
diff --git a/src/wallet/wallet.h b/src/wallet/wallet.h
index e3141baef04..67331dc3be0 100644
--- a/src/wallet/wallet.h
+++ b/src/wallet/wallet.h
@@ -921,7 +921,7 @@ public:
         uint256 last_failed_block;
     };
     ScanResult ScanForWalletTransactions(const uint256& start_block, int start_height, Optional<int> max_height, const WalletRescanReserver& reserver, bool fUpdate);
-    void transactionRemovedFromMempool(const CTransactionRef &ptx) override;
+    void transactionRemovedFromMempool(const CTransactionRef& tx, MemPoolRemovalReason reason) override;
     void ReacceptWalletTransactions() EXCLUSIVE_LOCKS_REQUIRED(cs_wallet);
     void ResendWalletTransactions();
     struct Balance {
diff --git a/test/functional/feature_notifications.py b/test/functional/feature_notifications.py
index 47200b6cc6f..fb0c7ceed4c 100755
--- a/test/functional/feature_notifications.py
+++ b/test/functional/feature_notifications.py
@@ -125,12 +125,7 @@ class NotificationsTest(BitcoinTestFramework):
 
             # Bump tx2 as bump2 and generate a block on node 0 while
             # disconnected, then reconnect and check for notifications on node 1
-            # about newly confirmed bump2 and newly conflicted tx2. Currently
-            # only the bump2 notification is sent. Ideally, notifications would
-            # be sent both for bump2 and tx2, which was the previous behavior
-            # before being broken by an accidental change in PR
-            # https://github.com/bitcoin/bitcoin/pull/16624. The bug is reported
-            # in issue https://github.com/bitcoin/bitcoin/issues/18325.
+            # about newly confirmed bump2 and newly conflicted tx2.
             disconnect_nodes(self.nodes[0], 1)
             bump2 = self.nodes[0].bumpfee(tx2)["txid"]
             self.nodes[0].generatetoaddress(1, ADDRESS_BCRT1_UNSPENDABLE)
@@ -138,7 +133,7 @@ class NotificationsTest(BitcoinTestFramework):
             assert_equal(tx2 in self.nodes[1].getrawmempool(), True)
             connect_nodes(self.nodes[0], 1)
             self.sync_blocks()
-            self.expect_wallet_notify([bump2])
+            self.expect_wallet_notify([bump2, tx2])
             assert_equal(self.nodes[1].gettransaction(bump2)["confirmations"], 1)
 
         # TODO: add test for `-alertnotify` large fork notifications